DFM Company's revenue down despite busy trading

The Dubai Financial Market Company reported a decline in revenue during the first quarter despite substantial trading activity on the emirate's stock market, with profits for the period undershooting analysts' estimates.

The Arabian Gulf's only publicly traded stock exchange, DFM Company generated net income of Dh27 million in the first quarter of this year, a decline of 11.4 per cent compared with the same period last year. Analysts' estimates were for profits of Dh51.6m.

"DFM has started the year 2013 on a very positive mode with trading value jumping by 300 per cent in January," said Essa Kazim, the exchange's chief executive.

However, a bounce in market volumes during the first quarter did not translate into higher revenues. Trading commission is the main source of income for the company.

Revenues fell 5 per cent to Dh65.7m during the quarter in comparison with the corresponding period a year earlier.

The exchange industry worldwide has seen margins eroded as financial firms desert equities in favour of derivatives trading and fixed income, with many bourses seeking consolidation.

For its part, DFM Company has sought to boost liquidity on its own exchange through licensing of six firms for margin trading.

The exchange had also benefited during the quarter from a rush of sukuk listings, said Abdul Jalil YousufDarwish, the DFM Company's chairman, during months when Dubai set out to become the capital of Islamic economy.

"DFM and Nasdaq Dubai sukuk listings have gained momentum during the first quarter of this year with listings from government of Dubai, Emirates and Dewa [Dubai Electricity and Water Authority] lifting the nominal value of sukuk listings on Dubai exchanges to $11.6 billion, the third biggest sukuk listing platform globally," he said.

During the first quarter, stocks on the DFM General Index rose 12.7 per cent. Gains on the index have since risen to 33.2 per cent on a year-to-date basis, making Dubai the third-best performing market globally.

The average daily value of stocks traded over the same period was Dh334m, an increase of 4.3 per cent compared with the same period during 2012, pointing to a compression on the bourse's trading margins.